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BULLETIN
ISSUE 37
DECEMBER 2015
NORMALIZATION OF GLOBAL MONETARY POLICIES,
FRAMEWORK OF INTEREST RATE CORRIDOR AND TURKISH
LIRA LIQUIDITY MANAGEMENT AND SIMPLIFICATION STEPS
Due to economic conditions brought about by the global financial crisis in 2008, interest rates in advanced
economies dropped to zero or close-to-zero levels. (Page 2)
NEWS AND PUBLICATIONS
FROM THE CBRT
AT A GLANCE…
• G20 Leaders’ Summit under the Turkish Presidency
• Conference on Macroprudential Policy: Effectiveness
and Implementation Challenges (Page 4)
• Research Notes in Economics
• CBRT Working Papers
• Inflation Report 2015-IV (Page 3)
CBRT POLICY RATES (24 December 2015)
CBRT
Overnight
Late
Liquidity
Window
Borrowing
Rate:
0%
CBRT
Overnight
Borrowing
Rate:
7.25%
One-Week
Repo Rate:
7.5%
CBRT RESERVES (25 December 2015)
CBRT
Overnight
Marginal
Funding
Rate:
10.75%
CBRT
Overnight
Late
Liquidity
Window
Lending
Rate:
12.25%
GROSS FX RESERVES
95.7 BILLION USD
GOLD
17.5 BILLION USD
INFLATION (December 2015)
8.81 Percent
NORMALIZATION OF GLOBAL MONETARY POLICIES, FRAMEWORK
OF INTEREST RATE CORRIDOR AND TURKISH LIRA LIQUIDITY
MANAGEMENT AND SIMPLIFICATION STEPS
Due to economic conditions brought about
by the global financial crisis in 2008,
interest rates in advanced economies
dropped to zero or close-to-zero levels.
However, since the policy implementations
fell short of reviving the domestic demand,
non-conventional monetary policies
were adopted. Thus, the global crisis led
to a change in the conventional central
banking concept; advanced economies’
central banks injected very high amounts
of liquidity to the markets through policies
such as large-scale asset purchases and
long-term funding.
AFTER THE GLOBAL FINANCIAL
CRISIS
In this period, capital inflows to Turkey
increased as a result of the rapid recovery
in the economy. As of end-2010, the CBRT
introduced a policy framework that, in
addition to the policy rate, includes an
interest rate corridor, an active liquidity
policy, reserve requirements and a reserve
options mechanism.
Interest Rate Corridor and Active
Liquidity Policy
To affect market interest rates and/or
market liquidity, the CBRT may provide
short-term (daily or weekly) liquidity to
the market when needed and borrow from
those with excess reserves at an overnight
maturity. The interest rate corridor is
defined as the range between the interest
rate at which the CBRT can borrow from
banks and the interest rate at which it can
lend to banks at an overnight maturity.
In addition, the CBRT may provide funding
to banks via one-week repo auctions.
In this system, the amount of one-week
funding can be changed on a daily basis,
thereby shaping the market interest rate to
form at a desired level within the corridor.
In the system, the width of the interest
rate corridor determines the range at
which short-term market interest rates
may fluctuate through the CBRT’s liquidity
operations.
Reserve Options Mechanism (ROM)
The ROM facility introduced by the CBRT
to minimize the likely unfavorable effects
of volatile capital flows on macro-financial
stability allowed banks to maintain a
portion of their Turkish lira required
reserves as FX and gold. Accordingly,
banks can use their FX assets to meet
their Turkish lira needs to a certain
extent, thereby willingly increasing
their FX and gold reserves. In this way,
the ROM mechanism functions as an
automatic stabilizer and an effective FX
liquidity instrument in that it helps reduce
the exchange rate volatility in domestic
markets triggered by capital flows. Banks
adjust their ROM utilization ratio depending
on external financing conditions, which is
an important factor in terms of preventing
the volatility that capital flows may create
in variables such as credit volume and
exchange rate.
ADJUSTING TO THE
NORMALIZATION PROCESS IN
GLOBAL MONETARY POLICIES
Uncertainties in the global economy
started increasing with the Fed’s signal
to exit from quantitative easing policies
in May 2013. These uncertainties led to
severe capital outflows and currency
depreciation in emerging economies,
including Turkey.
In 2015, the TL started to depreciate due
to domestic and foreign developments.
In response to these developments, the
CBRT tightened its liquidity stance to
mitigate the adverse impacts of exchange
rate developments on inflation.
The CBRT issued a press release on
18 August 2015 titled “Road Map during the
Normalization of Global Monetary Policies”
about the policies that can be implemented
before and after the normalization in the
monetary policies of advanced economies.
It was stated in the document that the
interest rate and Turkish lira liquidity
policy will be simplified and the interest
rate corridor will be made more symmetric
around the one-week repo interest rate
COMPONENTS OF THE INTEREST RATE CORRIDOR (LATEST OBSERVATION: 16 DECEMBER 2015)
12.5
10.0
and the width of the corridor will be
narrowed following the normalization of
global monetary policies.
In this framework, on 16 September 2015,
the CBRT announced the changes in
its Turkish lira liquidity policy via a
technical presentation titled “Briefing on
Simplification of the Collateral Framework
and Changes in the Primary Dealer
Liquidity Facility”. Accordingly, effective
as of 23 September 2015, the practice
of offering favorable interest rate on
borrowing facilities provided for primary
dealers was terminated and effective
as of 28 September 2015, the collateral
conditions for Turkish lira operations were
simplified.
The policy document, “Monetary and
Exchange Rate Policy for 2016” that was
announced at a press conference on
09 December 2015, stated that one-week
repo auctions would be the main funding
tool in the upcoming period and as was
mentioned in the “Road Map During the
Normalization of Global Monetary Policies”
document, the interest rate corridor would
be narrowed and made much symmetric
around the one-week repo rate.
REFERENCES
Akçelik, Y., Başçı, E., Ermişoğlu E., and
Oduncu, A. (2013). “The Turkish Approach
to Capital Flow Volatility”, CBRT Working
Paper, 13/06.
Başçı E. and Kara, H. (2011). “Financial
Stability and Monetary Policy”, CBRT
Working Paper, No: 11/08
Kara, A. H. (2012). “Monetary Policy in
Turkey After the Global Crisis”, CBRT
Working Paper No: 12/17.
Kara, H. (2015). “Interest Rate Corridor
and the Monetary Policy Stance”, CBRT
Research Notes in Economics No:15/13.
IMF, (2013). “Unconventional Monetary
Policies-Recent Experience and
Prospects”, Background Paper.
CBRT, (2013). “Parasal Aktarım
Mekanizması” (Monetary Transmission
Mechanism- in Turkish), Booklet, 14.
CBRT, (2014). “Nicel Gevşeme
Uygulamaları ve Çıkış Stratejileri”
(Quantitative Easing Practices and Exit
Strategies-in Turkish), CBRT Bulletin,
No: 33, 2.
CBRT, (2015). “Inflation Report”, 2015-III,
61-65.
7.5
5.0
2.5
0.0
01/11/12
01/01/13
One-Week Repo Rate
O/N Lending Interest Rate (Upper Limit)
BIST Overnight Repo Rates (5-Day Moving Average)
01/01/14
01/01/15
01/01/16
O/N Borrowing Interest Rate (Lower Limit)
CBRT Average Fund Rate (5-Day Moving Average)
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PUBLICATIONS FROM THE CBRT
RESEARCH NOTES IN ECONOMICS
• Stronger Balance Sheet Lower
Premium: Determinants of Real-Sector
Firms’ Borrowing Costs in Turkey (in
Turkish) (Fatih Altunok, Salih Fendoğlu
CBT Research Notes in Economics
No. 15/22, 11 November 2015)
• A Statistical Approach for Forecasting
Annual Changes in Industrial Production
(in Turkish) (Özgür Özel, Mahmut Günay
CBT Research Notes in Economics
No. 15/21, 06 November 2015)
• Interest Rate Corridor, Liquidity
Management and the Effective
Funding Rate in Money Markets
(in Turkish) (Deren Ünalmış CBT
Research Notes in Economics
No. 15/20, 04 November 2015)
• The Relationship of Consumer and
Commercial Credits with Current
Account Deficit in Turkey (in Turkish)
(Zeynel Harun Alioğulları , Yusuf Soner
Başkaya , Yunus Emrah Bulut , Mustafa
Kılınç CBT Research Notes in Economics
No. 15/19, 27 October 2015)
• The Relation between the Working Status
of Women Before and After Marriage
in Turkey (in Turkish) (Ayşe Arzu Yavuz,
Devrim Yavuz CBT Research Notes in
Economics No. 15/18, 23 October 2015)
• What Drives the Consumer Confidence
in Turkey? (Tuğrul Gürgür, Zübeyir Kılınç
CBT Research Notes in Economics
No. 15/17, 01 October 2015)
• Consumer Confidence Indices and
Financial Volatility (Hatice Gökçe Karasoy
CBT Research Notes in Economics
No. 15/16, 08 September 2015)
• Estimating the Bridging Day Effect
on Turkish Industrial Production
(Çağlar Yüncüler CBT Research
Notes in Economics No. 15/15,
08 September 2015)
For Research Notes in Economics, please
visit: www.tcmb.gov.tr (Publications/
Research/ Research Notes in Economics)
• Importance of Foreign Ownership
and Staggered Adjustment of Capital
Outflows (Özgür Özel, M. Utku Özmen,
Erdal Yılmaz Working Paper No. 15/31,
November 2015)
• Sources of Asymmetry and Non-linearity
in Pass-Through of Exchange Rate
and Import Price to Consumer Price
Inflation for the Turkish Economy during
Inflation Targeting Regime (Süleyman
Hilmi Kal, Ferhat Arslaner, Nuran
Arslaner Working Paper No. 15/30,
November 2015)
• Selective Immigration Policy and
Its Impacts on Natives: A General
Equilibrium Analysis (Şerife Genç
İleri Working Paper No. 15/29,
November 2015)
• How Does a Shorter Supply Chain
Affect Pricing of Fresh Food? Evidence
from a Natural Experiment (Cevriye
Aysoy, Duygu Halim Kırlı, Semih Tümen
Working Paper No. 15/28, October 2015)
• Decomposition of Labor Productivity
Growth: Middle Income Trap and
Graduated Countries (Gökhan Yılmaz
Working Paper No. 15/27, October 2015)
• Estimating Income and Price Elasticity
of Turkish Exports with Heterogeneous
Panel Time-Series Methods (İhsan
Bozok, Bahar Şen Doğan, Çağlar
Yüncüler Working Paper No. 15/26,
October 2015)
• External Shocks, Banks and Monetary
Policy in an Open Economy: Loss
Function Approach (Yasin Mimir,
Enes Sunel Working Paper No. 15/25,
September 2015)
• Not All Credit is Created Equal:
Mortgage vs Non-mortgage Debt and
Private Saving Rate in Turkey (Cengiz
Tunç, Abdullah Yavaş Working Paper
No. 15/24, September 2015)
• A Computable General Equilibrium
Analysis of Transatlantic Trade and
Investment Partnership and TransPacific Partnership on Chinese Economy
(Buhara Aslan, Merve Mavuş Kütük,
Arif Oduncu Working Paper No. 15/23,
September 2015)
For CBRT Working Papers, please visit:
www.tcmb.gov.tr (Publications/Research/
Research Notes in Economics)
CBRT WORKING PAPERS
• Compulsory Schooling and Early Labor
Market Outcomes in a Middle-Income
Country (Huzeyfe Torun Working Paper
No. 15/34, November 2015)
• “I Just Ran Four Million Regressions”
for Backcasting Turkish GDP Growth
(Mahmut Günay Working Paper
No. 15/33, November 2015)
• Has the Forecasting Performance of the
Federal Reserve’s Greenbooks Changed
over Time? (Ozan Ekşi, Cüneyt Orman,
Bedri Kamil Onur Taş Working Paper
No. 15/32, November 2015)
developments in financial markets,
financial intermediation and public finance,
and presents CBRT’s medium-term
forecasts.
There are several boxes in the Report:
Determinants of Consumer Confidence
Index in Turkey, Estimating Income
and Price Elasticity of Turkish Exports
with Heterogeneous Panel Time Series
Methods, Use of Leading Indicators
in Forecasting Unemployment Rates,
Projections on Labor Force Participation
Rate, The Relationship between Loans
and Private Savings, The Relationship of
Consumer and Commercial Loans with
the Current Account Deficit: Evidence for
Turkey and Other Countries, Public Debt
Stock and Budget Deficit Developments:
An International Comparison.
A live webcast of the press conference in
Turkish and simultaneous interpretation to
English was available on the CBRT website.
For the Inflation Report 2015-IV, please
visit: www.tcmb.gov.tr (Publications/
Reports/ Inflation Report)
FINANCIAL STABILITY REPORT
NOVEMBER 2015
The second Financial Stability Report of
2015 was issued on 30 November 2015.
The Report describes in detail the
macro‑financial developments and
measures towards financial stability and
explains the macroeconomic outlook,
developments regarding the non-financial
sector as well as the financial sector.
The Report had special topics on:
• Inflation, Inflation Volatility and Financial
Constraints in Turkey
• Risk and the Strength of Financial
Amplification: Evidence From Loan-Level
Data
• Reserve Requirement Ratios and Credit
Growth
• Resolution Through Creditors and
Shareholders: Bail-in
For the Financial Stability Report
November 2015, please visit: www.tcmb.gov.tr (Publications/Reports/
Financial Stability Report)
“INFLATION REPORT”, 2015-IV
The fourth Inflation Report of 2015
was presented at a press conference
held in Istanbul on 28 October 2015.
The Report covers international economic
developments, inflation developments,
supply and demand developments,
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AT A GLANCE…
G20 LEADERS’ SUMMIT UNDER THE
TURKISH PRESIDENCY
The Turkish Presidency of the Group of 20
(G20) hosted the G20 Leaders’ Summit on
15-16 November 2015, in Antalya, Turkey.
The Summit was chaired by President
Recep Tayyip Erdoğan. On 16 November
2015, the G20 Leaders issued the “G20
Leaders’ Communiqué” and the “Antalya
Action Plan” drawn in line with the Turkish
Presidency’s priorities. For the first time
in G20 history, a third statement, the “G20
Statement on the Fight against Terrorism”
was issued.
During the Summit, the risks and
uncertainties were evaluated with
respect to reinforcing the global economy
and lifting the potential while several
discussions were held on geopolitical
uncertainties, shortfall in global demand
and structural problems. In the meetings,
macroeconomic policies necessary for
sustainable and stable growth as well as
fiscal policies and transparency issues
supporting growth and employment were
discussed in detail.
In the Leaders’ Communiqué, the Leaders
stated that they were firm in their resolve
to ensure growth was robust and inclusive.
The Leaders stated that their aim was
to deliver more and better quality jobs
and recognized that advancing inclusive
growth and entrenching confidence require
the use of all policy tools and strong
engagement with all stakeholders.
The Leaders reiterated their commitment
to act collectively to lift the actual and
potential growth of their economies,
to create jobs, to enhance resilience,
promote developments and increase the
inclusiveness of policies. The Leaders
reaffirmed their previous commitments in
the past G20 summit communiqués.
For the first time in G20 history, a
third statement was issued in the
2015 Antalya Summit in addition to the
Summit Communiqué and the Action Plan.
The Leaders issued the “G20 Statement on
the Fight against Terrorism”, in which they
condemned the heinous terrorist attacks
in Ankara on 10 October 2015 and in Paris
on 13 November 2015 and reaffirmed their
solidarity and resolve in the fight against
terrorism.
The Leaders stated that they remained
united in combating terrorism; the
spread of terrorist organizations and
significant rise globally in acts of terrorism
directly undermined the maintenance
of international peace and security
and endangered the ongoing efforts to
strengthen the global economy and ensure
sustainable growth and development.
The Leaders also condemned all acts,
methods and practices of terrorism,
which cannot be justified under any
circumstances, regardless of motivation,
in all their forms and manifestations,
wherever and by whomever.
CONFERENCE ON
MACROPRUDENTIAL POLICY:
EFFECTIVENESS AND
IMPLEMENTATION CHALLENGES”
CONFERENCE
In the framework of the G20 Turkish
Presidency, the Central Bank of the
Republic of Turkey jointly organized
the Conference on “Macroprudential
Policy: Effectiveness and Implementation
Challenges” with the International
Monetary Fund and the Bank for
International Settlements on 26-27 October
2015, in Istanbul.
The Conference provided a forum for
policy makers and academics to share
their experiences and knowledge on the
effectiveness of macroprudential policies,
their interaction with other policies such as
monetary and fiscal policies as well as the
challenges implementing them.
EDITORIAL BOARD
Owner on behalf of the CBRT and Managing
Editor: Assoc. Prof. Yusuf Soner Başkaya
Editorial Board: Mustafa Aycan, Dr. Eyup Kahveci,
Tangül Hınçal, Canan Binal Yılmaz, Emrah Uslu,
Özgür Balaban, Duygu Konukçu, Cansu Gör, Özlem Öztek
Central Bank of the Republic of Turkey
Communications and Foreign Relations
Department
Anafartalar Mah. İstiklal Cad. No: 10 06050 Ulus
Altındağ Ankara
Free edition of CBRT.
ISSUE: 37 / DECEMBER 2015
Published quarterly by the Central Bank of the
Republic of Turkey.
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